Art Market Professionals

For Art market professionals

• AMPs have differing costs associated with resales.  Is it fair that AMP’s costs aren’t factored into the calculation of the royalty

  Art market professional’s concerned about whether the royalty accounts for differing AMP costs should note that the royalty is calculated exclusive of (i.e. disregards) any costs associated with the resale.   

  This leaves it up to the art market professional, the buyer, and the seller, to freely agree their costs, premiums, commissions etc and determine what is, in their particular circumstances, fair and lawful between them.   
  
  It is not the purpose or function of the legislation to presume, dictate, or discriminate those private commercial arrangements.  Instead, the legislation creates a predictable royalty by using a fixed percentage of the resale value.  This is the same for every qualifying resale, and every liable AMP. 

  This creates benefits to art market professional and artists alike.  Negotiation, custom, and freedom of contract, will determine fairness between parties to the resale contract as to their own costs, premiums etc.  And whatever they freely decide about those (and however that varies case-by-case), won’t prejudice or affect the “resale value” or the royalty total, which also ensures transparency and fairness to the artist.

• Does the transfer of a collectors estate count as a qualifying resale? E.g. Art collector leaves collection to an individual or a GLAM.

  The Transfer of a collector’s estate is unlikely to count as a qualifying resale unless there is consideration given.  If no consideration is given, then in our view that is not a qualifying resale.  If, however, consideration is given it may be a qualifying resale.

• Has there been any consideration regarding the extension of copyright duration that will be enacted sometime in the next four years?

  Currently the artist resale royalty will apply for 50 years after the death of the artist which aligns with New Zealand’s current Copyright Act. However our understanding is that the Copyright term will be extended prior 1 May 2028, and we would expect that the ARR term will then also be extended to align with the Copyright Act. 

• How do artists from countries other than NZ benefit from resale royalties?

  Australia and the United Kingdom are reciprocating countries. RRA collects royalties for Australian and United Kingdom artists when they make a qualifying resale in New Zealand, and vice versa.

• How do you define ‘limited number of copies’? 

  The Act does not define what a limited number of copies is, although there is provision in the Copyright Act that a 3 Dimensional artwork that has fewer than 50 copies produced is copyright protectable, so this might be a useful benchmark. We suggest using good faith best efforts to do your due diligence in researching, and keep a record of your research in case it is needed at a future date.  If you have any concerns or want to discuss then please just get in touch with us. 

• How does it work when an art consultant facilitates a resale between two private parties?

  The resale is considered a professional resale because an art market professional is involved.  That means, provided it meets the standard criteria, it will be a qualifying resale.

• How does Section 7(3) of the Act relate to “commissioned” artwork?

  Section 7(3) of the Act states “An artist has a right under this section irrespective of whether they are or were the first owner of copyright in the artwork.”

  This means that if the artwork was “commissioned” (as per Section 21(3) of the Copyright Act), then the artist who created the artwork is not the first owner of the copyright, and is still therefore potentially eligible for the artist resale royalty, as long as they are an “Eligible Artist”, the artwork is an “original visual artwork” by the artist, and the resale occurs before the right to receive the ARR has expired (see checklist 4 for more detailed information on when the ARR right expires).

• How does the scheme affect Art Market Professionals?

  There are legal obligations for Art Market Professions which require them to:

  • report qualifying resales of original visual artworks to RRA; and
  • pay to RRA* the resale royalty payable in respect of each qualifying resale.  The seller is also jointly & severally liable for payment.  

  These are explained in our Guide: Information for Art Market Professionals.

  Please register to stay informed about your obligations under the scheme, and to receive administrative support with compliance.

  (*This assumes the Art Market Professional is acting as agent for the seller on a resale.   In cases where there is no agent for the seller, then instead the buyer’s agent or the buyer will be jointly liable with the seller to make paymen

• How is the resale value calculated?

  The resale royalty payable is calculated at 5% of the “resale value” of the qualifying resale (section 16).

  Section 10 says that “resale value” means: “the value of the consideration given for the visual artwork under the contract for resale” which may include:

  • the amount paid in New Zealand dollars;  
  • the value of goods and/or services paid in kind;  
  • (if paid in another currency), the amount converted to NZD at the date of payment.   

  ‘Resale value’ does not include:

  • goods and services tax (GST; or
  • duties, levies, or taxes (etc) under the Customs and Excise Act 2018; or
  • “any costs associated with the resale, for example, a commission or a buyer’s premium” 

  Plain English Guidelines

  In plain English, this means that the “Resale Value” is the amount the buyer has agreed to pay the seller for the artwork itself.   All external and other associated costs (taxes, fees, or levies, etc) are separate to (not part of) the scheme or the Resale Value calculation.  This ensures the value of the royalty relates directly to the value of the artwork itself, and is not subject to other external or variable factors.

  For example:

  An original visual artwork sells at auction.  The sale and purchase agreement records that the buyer will pay $2,000 to the seller as consideration for the artwork (plus any applicable fees and taxes).  

  Under the AMP’s terms of service, the parties agree that the seller will pay the AMP a 20% commission ($400) for acting as its agent, and the buyer will pay the AMP a 15% premium (additional amount) ($300) for facilitating the resale.

  Resale Value

  Assuming the Act applies, in the example given above:

  • The “Resale Value” is $2,000 because, in terms of s 10(1) of the Act, that figure represents the value “given for the visual artwork under the contract for resale”. 
  • In plain English, this is the amount the buyer has agreed to pay the seller “for the artwork”. 
  • The artist is entitled to a 5% share in that Resale Value = $100 in this example.  (The AMP and the seller are jointly and severally liable to pay the $100 royalty to RRA).

  Other Associated Costs:

  Other fees, costs, taxes etc may or may not apply to the sale.  These are, however, separate matters to the value given for the artwork. 

  It is important to distinguish these other transactions from the “Resale Value”.  Note that commissions, premiums, taxes, and other costs are usually separately stated in your legal documents and invoices.  For example, they may appear as separate & distinct line items to the hammer price, within the same invoice (or in separate invoices).  They may appear in the AMP’s terms of service rather than in the contract for resale. 

  A helpful way to distinguish “Resale Value” from “costs associated” is first to ask (1) who is paying whom, and second to ask (2) in respect of what?  For example, “Resale value” is (in plain English) the amount the buyer has agreed to pay the seller, for the artwork.   By contrast:

  • a “buyer’s premium” is, first, an amount the buyer has agreed to pay to the AMP (i.e. not buyer to seller).  It is, second, not given “for the artwork”, but rather for the AMP successfully facilitating the resale. 
  • “commission” is, first, an amount the seller has agreed to pay the AMP (i.e. not buyer to seller).  It is, second, not given as consideration “for the artwork”.  Rather it is given for professional services related to the resale (e.g. marketing, valuation, handling & housing of goods, administration, auctioneering, and other professional services etc). 

• How much is the resale royalty payment?

  The amount is the same for both eligible artists and successors, a 5% royalty will be collected for eligible artists each time there is a qualifying resale of their original visual artwork. 

  The collection and distribution of the payment is managed by RRA, a not-for-profit. RRA will retain 20% for the purpose of funding RRA operations and distribute the remainder of the royalty to the visual artist or successor.

• How will the scheme work for galleries who often buy at auction to re-sell? Will the royalty be payable twice?

  A royalty is payable on each resale.  

  Who is liable in each instance is answered by section 17 of the Act.  The seller is always liable, and generally their agent will be jointly and severally liable.  Generally a buyer won’t be liable unless no agent is involved.  

  To give two contrasting examples:

  Where a gallery buys from an auction house or art consultant (who is acting behalf of a seller), the liable parties will be the seller and the seller’s agent (i.e. auction house or art consultant).  It’s unlikely the purchasing gallery would be liable in this scenario (unless the seller actually has no agent, and the buyer has no agent). 

  Where a gallery buys directly from another gallery (without using any agents), then the buying gallery will indeed be jointly liable with the selling gallery to pay the royalty on the purchase.   (How the two galleries share this liability will be a private matter).  The buying gallery will then be liable as a seller if/when they come to resell.  

• Is there any process we should follow to determine whether a sufficiently “limited number of copies” of a item exist to determine whether the work is an original visual artwork or not?

  If copies are not numbered as with a limited edition print, and there is no other information available to help ascertain how many copies have been made, then you can possibly assume it is not a sufficiently limited number and therefore not a qualifying resale.  The Act does not define what a limited number of copies is, although there is provision in the Copyright Act that a 3 Dimensional artwork that has fewer than 50 copies produced is copyright protectable, so this might be a useful benchmark. We suggest using good faith best efforts to do your due diligence in researching, and keep a record of your research in case it is needed at a future date.  If you have any concerns or want to discuss then please just get in touch with us. 

• RRA policy on non-compliance

  If a liable person fails to pay a resale royalty, or fails to provide the required reporting information, or if any other requirement of the Act is not complied with, then the Act provides that the Collection Agency may apply to a court for orders enforcing these obligations, and for any other order that is appropriate for an infringement of a property right.  The Act provides that this does not limit any other proceeding that may otherwise be taken by the Collection Agency, a right holder, or any other person affected.  Nor does it limit any other power of the court.  

• What are the requirements to report all secondary purchases to RRA, or only those that are a Qualifying Resale under the Act?

  You are only required to report a Qualifying resale as defined in the Act. The scheme will operate on good faith and the belief that you are better qualified to determine whether a purchased item is a qualifying resale or not, and we will not be investigating your decisions unless independently alerted

• What do I need to do as an Art Market Professional?

  Art Market Professionals:

  • Art Market professionals have certain obligations and liabilities under the Scheme.  These are explained in our Guide: Information for Art Market Professionals. 
  • Please register to stay informed about your obligations under the scheme, and to receive administrative support with compliance.